seems to be same convo from diff pov:
AT&T: 'Wireless' Is Getting Crowded (And Really Isn't About Voice)
Anthony Reuben
Jun. 3, 2015
Summary
•By 2016, multiple new players will compete for "wireless" customers.
•Competition will be more about content or the bundle and voice will move toward being "free".
•Though T is well positioned, the new market will be dynamic and poses risks to incumbent carriers.
On June 2, John Malone, Chairman of Liberty Media (NASDAQ:LMCA) (and Liberty Interactive (LINTA), Liberty Trip Advisor Holdings (LTPRA) and Liberty Broadband (NASDAQ:LBRDA)) suggested the soon-to-be-combined Charter Communications (NASDAQ:CHTR) and Time Warner (NYSE:TWC) would enter the wireless market. Mr. Malone's hints, added to previous speculation that Dish Networks (NASDAQ
ISH) will use its recently acquired spectrum to enter the wireless market (which it must use or lose) and Google's (NASDAQ:GOOG) recent slow-motion roll out of wireless service (Project Fi) should serve as notice that wireless is not just the Big 2 (AT&T (NYSE:T) and Verizon (NYSE:VZ)) and Little 2 (Sprint (NYSE:S) and T-Mobile (NYSE:TMUS)) anymore.
For the past several years, I have held a belief that "voice will be free" in the wireless industry. Much as in-home telephone is now basically thrown in with cable and internet, in the ubiquitous "triple plays" or "bundles" cable and satellite companies offer their customers, I believe wireless voice is headed for "but wait there's more" status.
We have all seen it coming. T is buying DirecTV (NASDAQTV) for growth, cash flow and consumer relevance. VZ's acquisition of AOL is not of the same import, but is nonetheless an acquisition of original content. Free voice will not happen overnight, but it now appears the wireless industry, by 2017 (if not sooner), will have multiple players selling multiple products in multiple ways. And like today, where our smart phones are purchased for their screen size, app ecosystem and camera capabilities (basically anything but phone features), tomorrow's "wireless service" will not really be about wireless.
We have already seen minutes become unlimited; the only rationed item is data. Data is growing in importance in both advertising and to the consumer. Many a family argue about the allocation of data or whether to expand purchased data (my teenage son complains 2.5 GB are too little for his varied needs; I respectfully disagree). Data is also driving the huge investments (and not predicted five years ago spend) by the carriers in spectrum and infrastructure. In a couple of years, voice will be "free", data an afterthought and content the point of value and differentiation.
Let us look ahead two or three years. The T and DTV merger is finally completed. GOOG has rolled out Project Fi to all major markets. DISH has a joint venture with TMUS. The CHTR/TWC entity is selling wireless in their quadruple play. S and VZ continue to compete (VZ likely with a premium content partner like Disney (NYSEIS)). In the competitive set described, there are two "pure play" wireless carriers (including VZ), three content/wireless companies and one company whose motivation is elsewhere (and I did not even mention Amazon (NASDAQ:AMZN)!).
As a T shareholder, you may say, "so what", as long as customers subscribe, the Company makes money and I get my dividend. And my churn (today) is at a record low! To that supposition I say, "not so fast". If voice becomes a commodity (I do recognize the near-term over simplification), consumers will subscribe for wireless services for many different and diverse reasons. Once a product is a commodity, differentiators and tie breakers include price (GOOG, S and TMUS), content (DISH, T and maybe VZ) convenience (CHTR/TWC) or promotion (AMZN???).
Using the example that opened this article, a CHTR/TWC customer may add wireless (perhaps in some sort of hybrid network, like GOOG's Project Fi which uses a combination of S, TMUS and WiFi) to get a deal. T may gain customers who value premier access to the NFL Sunday Ticket (the marquee aspect of the DTV deal). VZ may have partnered with ESPN (despite the recent dustup) to have exclusive sports and entertainment. You get the idea, the driving forces for subscribing to a carrier are going to be far more diverse and confusing then today. And the costs of differentiation are going to come from more than just spectrum and advertising. Think about why the market cap of Netflix (NASDAQ:NFLX) is so high.
As the "core" product (voice, and eventually data) becomes less valuable, the premium price (margin) associated with the core product will diminish and any premium value will shift to the valued added component (content). This is where things may get tricky for T (and VZ) shareholders. As margins decline as either purchase price decreases or additional costs are incurred acquiring content, previously sacrosanct items such as dividends become less than forgone conclusions. Personally, I think T (and VZ) protect their shareholders by spinning off spectrum and physical assets into a REIT-like entity ("AT&T Should Consider Splitting In Two". An asset-heavy division can provide a stable cash flow to fund a dividend/distribution, while the increasingly competitive consumer-facing business can garner a multiple reflective of its (potential) success in the dynamic marketplace. The asset-heavy division could also potentially sell to frenemy competitors (like we are starting to see with GOOG's Project Fi) leveraging investment.
I suspect 2015 will be the last status quo year. T will be focused on its DTV acquisition. GOOG is going slowly with Project Fi, trying not to ruffle feathers. DISH will not yet have launched whatever it winds up doing. And the "quadruple play" will have to wait until the CHTR/TWC merger is completed.
The Chinese have a curse, "May you live in interesting times." In 2016 things will get "interesting". When things get interesting, the perception of risk increases. When the perception of risk increases, the safest assets have a tendency to lose value. The safest assets are T and VZ.
Seeking Alpha
AT&T: 'Wireless' Is Getting Crowded (And Really Isn't About Voice)
Anthony Reuben
Jun. 3, 2015
Summary
•By 2016, multiple new players will compete for "wireless" customers.
•Competition will be more about content or the bundle and voice will move toward being "free".
•Though T is well positioned, the new market will be dynamic and poses risks to incumbent carriers.
On June 2, John Malone, Chairman of Liberty Media (NASDAQ:LMCA) (and Liberty Interactive (LINTA), Liberty Trip Advisor Holdings (LTPRA) and Liberty Broadband (NASDAQ:LBRDA)) suggested the soon-to-be-combined Charter Communications (NASDAQ:CHTR) and Time Warner (NYSE:TWC) would enter the wireless market. Mr. Malone's hints, added to previous speculation that Dish Networks (NASDAQ
ISH) will use its recently acquired spectrum to enter the wireless market (which it must use or lose) and Google's (NASDAQ:GOOG) recent slow-motion roll out of wireless service (Project Fi) should serve as notice that wireless is not just the Big 2 (AT&T (NYSE:T) and Verizon (NYSE:VZ)) and Little 2 (Sprint (NYSE:S) and T-Mobile (NYSE:TMUS)) anymore. For the past several years, I have held a belief that "voice will be free" in the wireless industry. Much as in-home telephone is now basically thrown in with cable and internet, in the ubiquitous "triple plays" or "bundles" cable and satellite companies offer their customers, I believe wireless voice is headed for "but wait there's more" status.
We have all seen it coming. T is buying DirecTV (NASDAQ
TV) for growth, cash flow and consumer relevance. VZ's acquisition of AOL is not of the same import, but is nonetheless an acquisition of original content. Free voice will not happen overnight, but it now appears the wireless industry, by 2017 (if not sooner), will have multiple players selling multiple products in multiple ways. And like today, where our smart phones are purchased for their screen size, app ecosystem and camera capabilities (basically anything but phone features), tomorrow's "wireless service" will not really be about wireless. We have already seen minutes become unlimited; the only rationed item is data. Data is growing in importance in both advertising and to the consumer. Many a family argue about the allocation of data or whether to expand purchased data (my teenage son complains 2.5 GB are too little for his varied needs; I respectfully disagree). Data is also driving the huge investments (and not predicted five years ago spend) by the carriers in spectrum and infrastructure. In a couple of years, voice will be "free", data an afterthought and content the point of value and differentiation.
Let us look ahead two or three years. The T and DTV merger is finally completed. GOOG has rolled out Project Fi to all major markets. DISH has a joint venture with TMUS. The CHTR/TWC entity is selling wireless in their quadruple play. S and VZ continue to compete (VZ likely with a premium content partner like Disney (NYSE
IS)). In the competitive set described, there are two "pure play" wireless carriers (including VZ), three content/wireless companies and one company whose motivation is elsewhere (and I did not even mention Amazon (NASDAQ:AMZN)!). As a T shareholder, you may say, "so what", as long as customers subscribe, the Company makes money and I get my dividend. And my churn (today) is at a record low! To that supposition I say, "not so fast". If voice becomes a commodity (I do recognize the near-term over simplification), consumers will subscribe for wireless services for many different and diverse reasons. Once a product is a commodity, differentiators and tie breakers include price (GOOG, S and TMUS), content (DISH, T and maybe VZ) convenience (CHTR/TWC) or promotion (AMZN???).
Using the example that opened this article, a CHTR/TWC customer may add wireless (perhaps in some sort of hybrid network, like GOOG's Project Fi which uses a combination of S, TMUS and WiFi) to get a deal. T may gain customers who value premier access to the NFL Sunday Ticket (the marquee aspect of the DTV deal). VZ may have partnered with ESPN (despite the recent dustup) to have exclusive sports and entertainment. You get the idea, the driving forces for subscribing to a carrier are going to be far more diverse and confusing then today. And the costs of differentiation are going to come from more than just spectrum and advertising. Think about why the market cap of Netflix (NASDAQ:NFLX) is so high.
As the "core" product (voice, and eventually data) becomes less valuable, the premium price (margin) associated with the core product will diminish and any premium value will shift to the valued added component (content). This is where things may get tricky for T (and VZ) shareholders. As margins decline as either purchase price decreases or additional costs are incurred acquiring content, previously sacrosanct items such as dividends become less than forgone conclusions. Personally, I think T (and VZ) protect their shareholders by spinning off spectrum and physical assets into a REIT-like entity ("AT&T Should Consider Splitting In Two". An asset-heavy division can provide a stable cash flow to fund a dividend/distribution, while the increasingly competitive consumer-facing business can garner a multiple reflective of its (potential) success in the dynamic marketplace. The asset-heavy division could also potentially sell to frenemy competitors (like we are starting to see with GOOG's Project Fi) leveraging investment.
I suspect 2015 will be the last status quo year. T will be focused on its DTV acquisition. GOOG is going slowly with Project Fi, trying not to ruffle feathers. DISH will not yet have launched whatever it winds up doing. And the "quadruple play" will have to wait until the CHTR/TWC merger is completed.
The Chinese have a curse, "May you live in interesting times." In 2016 things will get "interesting". When things get interesting, the perception of risk increases. When the perception of risk increases, the safest assets have a tendency to lose value. The safest assets are T and VZ.
Seeking Alpha
